Apartments in mixed-use – a root cause

Take a look at this beautiful artist’s rendering of a mixed-use building. This is from the Glenwood Park mixed-use project in Atlanta. You have to admit, this looks nice with retail on the ground floor and a respectable number of condos above. Were a consultant to put this picture in an LCI survey questionnaire it would no doubt score high marks.

But there’s a cloud hanging over beautiful buildings like these – an external force that makes these types of mixed-use buildings practically unmarketable to buyers. I believe this external influence may be the root cause for Alpharetta’s and Avalon’s recent shift towards apartments in mixed-use.

Fannie Mae, Freedie Mac and HUD have all put restrictions on condo financing. Among these restrictions are limits on retail usage within a building with condos. They may vary from 10% to 30% of total square footage. This means that the more retail there is in a building, the less likely a condo buyer can qualify for a mortgage that conforms to these standards. The pictured building from Glenwood Park likely has a retail component of near 35%, something that stalled a portion of this development.

There are two ways a mixed-use developer can work around these restrictions. They can…

Go Vertical

Build ‘em higher! Just start stacking floor over floor, condo over condo until the ratio is tilted more in the favor of residential. Of course this increases height of buildings, something that isn’t favorable to the community and even to potential buyers.

Apartments

Don’t sell condos at all. If residents rent the units then there is no fussing with conforming mortgage nonsense. It might explain Avalon’s apartments, all of which are proposed in four story buildings.

It might also explain Alpharetta’s interest in removing nearly all restrictions on apartments in mixed-use zoning. The city’s mixed-use ordinances were likely developed before Fannie and Freddie clamped down on mixed-use condos.

It’s all a curious thing to consider. Proponents of mixed-use are frustrated by policies like this that favor (what they consider failed) single-family residences in suburbia over more “progressive” mixed-use.

In my mind this is a problem at the Federal level in agencies laden with unnecessary regulation and bureaucracy. I don’t believe municipalities like Alpharetta should have to bear the brunt of this by changing ordinances and land use policies in a manner against the will of the people. Fix the problem where it exists or ask developers to look for other solutions that work within the existing set of rules.

Thanks to Michael Hadden for his help researching this issue. Michael’s blog is New Urban Roswell. And I’m done writing about Avalon for a little bit!

6 Responses to “Apartments in mixed-use – a root cause”

  1. Greg February 9, 2012 at 8:55 am #

    Again, though, NAP knew about this rule AND about Alpharetta being over it’s 15% limit on apartments in the city BEFORE they paid $22M for this property.

  2. Kim February 9, 2012 at 9:52 am #

    Greg is right.

    Adding height gives the impression of apartments/condos first, retail an afterthought. No one wants to shop in what is perceived to be mainly an apartment/condo complex. In fact many of those retail spots in those types of complexes have a high vacancy rate while the residential fills.

    From our survey of 577 residents (boldface = survey results):
    Alpharetta’s current housing mix is: 62% single family homes, 7% townhomes, 6% condominiums, 25% apartments. Since 2003, Alpharetta has approved 1,961 condominiums and 366 apartments. When these units are built, the housing mix will be: 56% single family homes, 6% townhomes, 14% condominiums, 24% apartments. Currently Alpharetta has a goal to limit rental apartments to 15% of all housing units. Should Alpharetta also limit the ratio of these units?

    Condominiums: Limit the ratio, 89%, Allow unlimited, 11%
    Townhomes: Limit the ratio, 83%, Allow unlimited, 17%
    Single Family Homes: Limit the ratio, 29%, Allow unlimited, 71%

  3. Tom Miller February 9, 2012 at 1:28 pm #

    Lee and Michael,

    Thanks for your research on this. Excellent work. I hadn’t heard about this.

    The Alpharetta zoning code doesn’t even appear to allow for a mix of uses within one building, so any residential over retail or office over retail does not meet Alpharetta’s zoning code. I have pointed this out to Community Development for four years.

    The current code calls for residential, office and retail pods based on acreage. This is to allow only one use per pod and to measure the density within that pod to confirm that it meets the zoning code.

    There are good reasons to put residential, office and retail in separate buildings, even if only a few feet apart. Noise, lights, smells for these uses should be separated. The exception would be an situation where a business owner lives above his family business. Otherwise mixing uses in a building could be problematic.

    To support my position that the code doesn’t allow mixed use buildings, the Mixed Use code states that, “Each area within an MU masterplan shall be designated for use in accordance with one of the various zoning districts in this ordinance”.

  4. Michael Hadden February 9, 2012 at 10:00 pm #

    Good post Lee. I think you’re on to something. Reduce the regulation and you will start to get development that is closer to the true market demand. Thanks for the pub as well.

  5. Mark February 13, 2012 at 12:44 pm #

    Prospect Park is an embarrassment for the City of Alpharetta and Diana Wheeler, the Community Development Director. Allowing the site to be clear cut AND no City ownership of Westside Parkway prior to development was total carelessness. You can be sure she will not allow any silly ratio to get in the way of her vision of having apartments on this site. Diana Wheeler is a “zoning contortionist”. The limit on apartments was established for good reason. Reduced government regulation or not, the limits should stand. Let’s see if this Mayor and City Council are as mesmerized by her “moves” as the last administration was.

  6. B February 13, 2012 at 5:46 pm #

    Maybe the community development director marches to orders to keep her job. The mayor + city council has final say over the director so voters should hold them accountable. If the new crew perpetuates the same legacy maybe look for the man behind the curtain and follow the money?

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